Public Bill Committee

[Mrs. Joan Humble in the Chair]

Clause 64

Decommissioning notices relating to offshore renewable energy installations

Question proposed, That the clause stand part of the Bill.

Malcolm Wicks: Good morning to you, Mrs. Humble, and to the Committee.
Let me make a very brief introduction to the clause. As hon. Members know, one of the themes in the Bill is the decommissioning of various infrastructure involving oil and gas drilling and exploitation, as well as gas storage in the future. The Bill also focuses on the decommissioning around carbon capture and storage in the future, decommissioning relating to nuclear, which we discussed at useful length recently, and the decommissioning of renewables.
The clause concerns renewables and their eventual decommissioning. The Government are committed to ensuring that renewables play an increasingly important role in the UK’s energy mix. It is anticipated that a large proportion of the renewable electricity in the future will be generated offshore. The reforms of the renewables obligation, as we discussed in part 2, are intended to support that growth by providing increased levels of support to the offshore wind industry.
As a signatory to the United Nations convention on the law of the sea, the Government have international obligations to ensure that redundant offshore installations are removed from the sea bed to ensure safety of navigation and to ensure the protection of fisheries and the rest of the marine environment.

Charles Hendry: I am grateful to the Minister for giving way quite so early. Can he tell us how many turbines he is considering in relation to this? In particular, the Government have talked about 33 GW of offshore wind, so that is the 8 GW plus 25 GW. Does he expect that to be the installed capacity or the available power? In other words, if there was a 40 per cent. load factor, one would need more than that to get 33 GW. Therefore, is that the total capacity or the actual output?

Malcolm Wicks: Perhaps I can come back with the details later. The Secretary of State has indicated that, in a future licensing round, that kind of capacity will be available. It will be subject to environmental assessment and so on, so it is difficult at this stage to predict precisely the number of offshore wind turbines. As I understand the developments—and this is a matter for the commercial sector—we may well see much larger wind turbines in the future. There is a lot of work going on offshore and I know that our new Energy Technologies Institute is interested in the implications of offshore wind and whether future technology might be different from the onshore wind turbines that we have had. If I can return to the hon. Gentleman’s specific question at some stage, I will.
In line with the “polluter pays” principle, sections 105 to 114 of the Energy Act 2004 introduced a statutory decommissioning scheme for offshore wind and marine energy installations. The provisions in chapter 2 of the Bill are intended to strengthen the decommissioning scheme in the 2004 Act. The clause will add associates of the developer into the list of persons from whom the Secretary of State may require a decommissioning programme.
Clause 65 ensures that funds set aside for decommissioning cannot be accessed by creditors in the event of a company becoming insolvent and will be available only for the purpose that they were originally set aside for. Clause 66 ensures that the Secretary of State has access to the necessary information when making a judgment on the suitability and financial viability of a decommissioned programme put forward by an operator.
As I mentioned, clause 64 amends the Energy Act 2004 by adding associates of the developer, such as a parent company, to the list of persons from whom the Secretary of State may require a decommissioned programme. The ability to require a decommissioned programme from an associate follows practice in the offshore oil and gas sector, which is set out in section 30 of the Petroleum Act 1998. It seeks to ensure that the costs of decommissioning can be met without recourse to the taxpayer in cases where the developer does not have the financial resources to meet those costs, but the associate does. The issue of not having recourse to the taxpayer is central to our decommissioning programme.

Steve Webb: As the Minister says, the clause defines an associate, and again we have the issue of definition. When we queried the threshold last time, the Minister said that we would come to it—I think with reference to oil and gas but it applies here as well. Under the clause, an associated company would own more than half of the share capacity, but under the nuclear provision, it would be 20 per cent. of capacity. Does the Minister not think that there is a risk of companies organising their business to get under the 50 per cent. threshold here? If it was necessary to add a 20 per cent. threshold for nuclear, why does the same consideration not apply to this clause as well?

Malcolm Wicks: I think, as we discussed when we considered the nuclear issue, that the issues at stake when it comes to nuclear are mighty big ones in terms of the decommissioning costs. As we noted, hundreds of millions of pounds are involved, and then there is the sheer importance of an effective decommissioning of a nuclear plant and of disposing of the waste in the ways that we have discussed. That might be why we were advised to be more rigorous when it comes to nuclear, but the provisions here, by looking at associated companies, are prudent in terms of safeguarding the taxpayer.
Provided the associate has adequate financial resources, the new power will enable the Secretary of State to approve a decommissioning plan that would otherwise have had to be rejected if it had come from a developer with inadequate financial resources of its own. The clause will provide greater clarity and certainty for developers and investors by giving the Secretary of State more options to approve decommissioning programmes in a wider range of circumstances, with a wider range of developers. As a result, we will have firmer foundations for growing the robust and internationally competitive offshore renewables sector that we all wish to see.
For the purposes of the provisions in this chapter of the Bill, the clause includes a test used to define associates. A company—let us say company A—is an associate of another company, B, if A controls B or if a third company controls both A and B.
In summary, these provisions will further improve the business environment for offshore renewables by providing the Secretary of State with greater flexibility in approving decommissioning programmes. They will now allow the Secretary of State to look to a controlling associate for a decommissioning programme where the developer does not have sufficient assets of its own. That is already the case for oil and gas. These new provisions should allow more programmes to be approved, which in turn will assist more offshore renewables projects to proceed.
On associate definitions, definitions are consistent with the oil and gas regime. The difference from the nuclear regime reflects, as I was saying, the greater liabilities and we mentioned as an example somewhere between £600 million and £900 million. The hon. Member for Northavon is interested in the noughts and there are quite a few noughts there.
I think that that is the answer—we just need greater rigour and greater safeguards when it comes to nuclear energy, so we have £600 million or more compared with, say, £10 million for offshore wind energy. I do not think it is a full answer to the hon. Member for Wealden’s question but it might help if I say that at the moment there are currently some 394 MW of installed offshore renewable energy generating capacity in the UK, with a further 3.1 GW of capacity consented. There is a further 2.1 GW of generating capacity under consideration, with another 3 GW expected from developers that have been issued with round 1 or round 2 licences from the Crown Estate.
On the hon. Gentleman’s question about 33 GW in the future, we are not in a centrally planned state, so one cannot predict that that will be the amount. We have tried to facilitate those kinds of developments, but I am advised that it is roughly 2 MW per turbine at the present time. However, as I indicated, the feeling I get from industry is that in future, some of these offshore capacities could be much larger, so the number of turbines would therefore be smaller than the current arithmetic might dictate.

Charles Hendry: It is a pleasure to serve under your chairmanship, Mrs. Humble. It is also a great pleasure to find that our friends from the Liberal Democrats are here with us today, still in their posts.

Steve Webb: It took the hon. Gentleman 10 minutes to get to that.

Charles Hendry: Exactly. Had I had a chance to get to it earlier, I would have done so. However, whether the Liberal Democrats are here to abstain in person or whether they will be voting against one another remains to be seen.
We have touched on some important issues during the Minister’s speech. We have to get a greater understanding of the order of magnitude that we are looking at. He says that we do not live in a centrally planned economy—sometimes it feels a bit like that, but I realise that we cannot determine exactly how many turbines there should be. However, there is a fundamental issue as to whether the Government’s idea for 33 GW is for installed capacity or total output. If it is total output, one needs many more turbines to deliver that, because the load factor offshore is typically about 40 per cent. If one wants to get 33 GW of output, 80 GW of installed capacity is needed. So, we are looking at a massively different order of magnitude. To understand the decommissioning process, we need greater clarity on this issue.

Hugo Swire: Does my hon. Friend share my concern about the lack of attention that has been given to the possible effect on our very busy shipping lanes—particularly between Britain and France—if there is to be an explosion in the number of offshore wind farms?

Charles Hendry: In some cases, I am relatively relaxed about it. Many of the offshore turbines will be built on sandbanks, which is the logical place to put them—shipping should not be going where there are sandbanks. In most cases that would be all right. However, if one looks at the potential numbers, an enormous amount of the turbines would have to be put into deep waters. To take that a stage further, 33 GW of output, if it was 2 MW per turbine, is 16,000 turbines. If one needed the 80-plus GW to deliver that amount of output—

Malcolm Wicks: To help the hon. Gentleman, the 33 GW is for installed capacity.

Charles Hendry: Right. Now that raises an entirely different challenge for the Minister, which is that if one has only 33 GW of installed capacity, the total output from that will be about 8 GW. The Government cannot meet their European commitments with 8 GW of wind power. If we are getting only 8 GW of power from them—[ Interruption. ] Sorry, I mean 12 GW; I bow to the economics graduate maths of my colleagues. We will be unable to get close to the European commitment of 15 per cent. of our energy to come from renewable sources by 2020. The Government cannot have it both ways—we need greater clarity from them on this.
We are, however, still looking at a huge number of turbines. If one wants 33 GW of installed capacity, at 2 MW per turbine that will come out at 16,000 turbines. Even if one goes to the highest expectation for how powerful those turbines could be, which is potentially 5 MW, one is still looking at an enormous number of turbines—7,000. The physical construction programme implications of that—how many can be built each day—present a major challenge.
The Government now have a gaping hole between the renewables that they think they can achieve and what will be their commitment to the European Union to meet their 2020 target. I hope that the Minister can give us some assurances on how we can deliver this, because the Government are trying to have it both ways.
Some other issues need clarifying. Who will be responsible for inspecting offshore renewable installations to ensure that they are still safe? We are looking, potentially, at thousands of offshore turbines. They will have sophisticated remote monitoring systems to show how they are working and how much electricity they are generating. However, that is not the same as having up-to-the-minute information on the safety of an installation. Just this week, we saw pictures in the papers of a wind turbine disintegrating in the force of the wind. What will happen if they start to break up? How will the process work for requiring the immediate dismantling of the residual elements of a turbine? A fractured turbine is a much greater danger in relation to shipping and others issues than a turbine with all its blades in place.
Presumably, this also relates to underwater installations. How will they be monitored and by whom? Who will determine that such installations have stopped working permanently and are genuinely at the end of their lives? Will there be a certification of worthiness, so that an inspector can say that an installation’s useful life is over, even if the operator does not agree?

Hugo Swire: There is also the question of installations being liable to possible terrorist attack.

Charles Hendry: That is always going to be a risk in our current environment. One needs to be able to react quickly when there is a terrorist atrocity and to ensure that the installations affected have been made safe and decommissioned effectively.
Will the Minister also tell us more about how the decommissioning fund will work? Over what period will the operator contribute to the fund? Will there be a standard formula or different options? How much will need to be put into the fund before a wind farm starts operating? Who will manage the fund, and who will establish how much needs to be put in and whether it needs to be topped up from time to time?
The final point relates to the Severn barrage or potential Severn lagoons. I am not certain whether that counts as an offshore or between-shore installation, but it would be useful to know from the Minister whether it is covered. I assume that a Severn barrage would be designed and constructed to be permanent, and not to be decommissioned at all. The hope is that it would be generating power over many decades, with parts replaced as necessary. Therefore, does there need to be a decommissioning fund for a project such as the Severn barrage or would it be exempt from the rules that the Minister is suggesting?

Steve Webb: Good morning, Mrs. Humble. In this section on offshore renewables, it seems appropriate to ask a couple of questions about the connection between offshore renewables and the grid.
The Government’s model, as I understand it, is that if I want to set up an offshore wind turbine, I might be responsible for the connection to the mainland. I am not sure about that. Presumably, in the context of the clause, I would be responsible for decommissioning the connection when I am done—not just the turbine, but the infrastructure. As it is critical for the roll-out of wind turbine networks, how is that interconnection process going to work?
If an operator not only has to get a turbine out there and running, but is also responsible for the connection to the mainland and from there to the grid, and if that is a purely private obligation, that could be a serious disincentive to the roll-out of offshore wind power. If there were some concept of a grid—a trunk network akin to the motorways—perhaps with the state paying, or at least ensuring that it was non-competitive, there would be more of a boost to the offshore renewables we are talking about.
The Minister has not yet been clear about where that infrastructure will come from. Decommissioning arises only if the private sector provider has put in the infrastructure. I may be hazy about that as I am new to the issue, but I get the sense from the industry that there is considerable concern that the roll-out of offshore renewables will be hindered if the Government require the offshore renewable developers also to put in place the infrastructure to bring the power onshore. If there is an area offshore where several providers—several energy companies—are in place, is it rational to expect them to have their own separate infrastructure to bring the power onshore and, indeed, from the point where it touches land to the point where it accesses the grid, or is there any scope for sharing? If everybody has to do everything for themselves, there is great multiplication and additional decommissioning costs at the end of the process.
Earlier in the Bill, we looked at renewables obligation certificates and giving extra incentives to different sorts of technology. Presumably, that is a key part of the Government’s renewable energy strategy, so they will want to remove barriers. How does the Minister see the infrastructure working and being operated between these offshore renewable installations and the mainland and then the grid? Who would own it, who would provide it and who would decommission it in the context of the clause?

Malcolm Wicks: Again, this has been a useful debate and happily, small sections of it were relevant to the clause. I say that because there could be a debate about offshore wind, but this is not that debate; this is something rather narrower about decommissioning.
Let me try to be helpful, because the hon. Member for Wealden was interested in capacity and how it relates to generation. I am advised that 33 GW of capacity equals about 8 GW of generation, so I hope that that is helpful. I am trying to work out the arithmetic and I think that is where we are, for the obvious reason that the wind does not blow all the time. Let us just make the obvious point, because I get a lot of correspondence from constituents of MPs saying, “What happens when the wind stops?” Basically, because of the national grid, there is a mix of energy sources and we need the base load and so on.
Let me say at the outset that we have never said that where we are now with our planning will necessarily get us to the European target, although of course if we move towards real capacity offshore, as we hope to, that will help. As I said in earlier sittings, in the light of the European target, which is likely to be 15 per cent. or thereabouts—we are still discussing that—we are now developing a new renewable energy strategy. We hope to be able to consult on that and to issue a paper sometime during the summer. I see it in two phases. What we have done in the past, and what we were planning prior to the Euro target of 2020 gets us quite a long way, but it does not get us to the 15 per cent., or whatever it will be. That will require something of a revolution, which is good because we need a wider revolution in terms of decarbonising our economy, so we are working hard on what steps we now need to take. I certainly recognise that the gigawatts and how that translates into generation will not, by itself, enable us to hit our target.

Charles Hendry: I will not go into further extended discussion about gigawatts as I realise that the Committee’s eyes are glazing over, but does the Minister agree that to get 15 per cent. of our energy from renewable sources translates into about 35 to 40 per cent. of our electricity having to come from renewable sources? That is what independent people are generally saying: in order to reach the European target of 15 per cent., a much higher proportion—35 to 40 per cent. of our electricity—will have to come from renewables.

Malcolm Wicks: I would not want to be tied to a certain percentage, but I think the hon. Gentleman has the right order of magnitude. In terms of hitting our European target, whatever it turns out to be—let us say, for the sake of argument, 15 per cent.—clearly the easiest way of doing that is in terms of electricity. Obviously we want to make progress in other ways, on motor transport for example, but the easiest way is in terms of electricity, so the implication for the future proportion of our electricity generated from renewables is significant. Therefore, I agree with the hon. Gentleman on that.
Let me deal with some other issues. The hon. Member for East Devon asked about shipping. Principal shipping lanes will be avoided. We are not going to plant wind farms in the middle of a big, obvious shipping lane. For non-principal lanes, developers would need to reach a commercial agreement with those who use them. I hope that the hon. Gentleman is reassured that we have that issue in mind. In terms of the safety inspection of offshore installations, I think—although sometimes I am wrong, so I will check—that it is the responsibility of the Health and Safety Executive. If I am wrong about that, I will correct myself in due course.
The hon. Member for Northavon asked about a fund with regard to offshore decommissioning. Our judgment is that unlike with nuclear power, that is not necessary because of the orders of magnitude. Earlier I contrasted what may be a £10 million figure with the much larger number of noughts needed for nuclear, and we do not think that that is necessary. It is important for the Secretary of State to be sure that there is financial security at the start of the life. That is where we need the reassurances.
I am not sure whether the hon. Member for East Devon is a supporter of offshore wind or not—
 Mr. Swire indicated assent.

Malcolm Wicks: Good. The hon. Gentleman is understandably worried about terrorist attack. We are all worried about that, and a number of measures are in place—it is not just an issue for offshore wind. However, because of the wide range of areas covered, a terrorist attack on a single or multiple wind farm, or other renewable station, would not have a significant impact on generating capacity. That is not to say that we are relaxed about it—of course we are not—but given the scale involved, I do not think that it is a big issue.
The hon. Member for Northavon asked about grid transmission. We had an earlier discussion about the new regime on transmission under clause 40. On my understanding, the regime that we are putting in place does not require or even allow the installer to run the grid to shore. That will be subject to competition; it is a new regime and other companies will be players in installing those grids.

Hugo Swire: With regard to offshore connectivity to the main grid, is it envisioned that that will be by underground power lines or by overhead power lines? If they will be overhead power lines, what effect will that have in areas of outstanding natural beauty, which are often around the coast where the power will be coming onshore?

Malcolm Wicks: They would be underline—under the sea

Hugo Swire: And when they come onshore?

Malcolm Wicks: I may need to come back to the hon. Gentleman on the exact arrangement there. Certainly, the power lines will run under the sea, but I will come back to him about what I suspect may be slightly different arrangements for when they come onshore. In terms of areas of outstanding natural beauty, the lines will only affect that of fishes and other sea creatures, as they will run under the sea. I am advised that such power lines tend to be underground, but it would depend on particular licensing and consents.

Hugo Swire: The Minister will be aware that there is a real issue here. Of course I appreciate that the power lines will be under the sea when they are offshore, but they have to come onshore at some point in order to connect to the grid. My question is simple. When the power comes onshore on our coastline, will it still be underground? If it is overground, there will be huge cables and pylons and so on, and they are unsightly and would disfigure our coastal landscape. This warrants more than a slightly flippant remark about it endangering fish and other such life.

Malcolm Wicks: I recommend a sense of humour to the hon. Gentleman on occasion.

Hugo Swire: I am well known for my sense of humour, but I like the coastline.

Stephen Ladyman: Will my hon. Friend give way?

Malcolm Wicks: I want to try to deal with the point, but I think that I can best deal with it later, if there is an opportunity to do so, or in correspondence. I can well imagine that the arrangement might be rather different, depending on matters such as terrain and proximity to the grid and so on. I shall have to come back to the hon. Member for East Devon on this issue; I do not think that there is one particular answer. I have visited a number of such sites and I am trying to remember the arrangement, but I suspect that it will vary. I appreciate that the hon. Gentleman wants to protect natural beauty. I do not know whether that is a cue for my hon. Friend the Member for South Thanet.

Stephen Ladyman: I will try to be helpful to my hon. Friend. One of these lines has been planned to come ashore in my constituency, on a site of special scientific interest. I can assure him that it will be under the ground, hidden from view, and that it will not emerge until it gets to the substation. I warn him, however, that my local fishermen are worried about the effect of magnetic fields on the sex life of skates, so he might have to deal with that at some point.

Hugo Swire: The Minister must get his skates on.

Malcolm Wicks: Some humour! I thought that it was quite good. I thank my hon. Friend the Member for South Thanet for his intervention, but it is far too early in the morning to pursue that particular issue. To help the hon. Member for Northavon, we discussed the matter of transmission earlier. We are pursuing an approach based on competitive tendering for offshore transmission, so the person who builds the installation will not have the responsibility for wiring it up to the shore and protecting natural beauty. We expect that all round 2 projects will want to connect directly to the shore—round 2 is where we are at the moment.
On the hon. Gentleman’s point about the grid, in future, given the issues surrounding the gigawatts and the number of wind turbines, ideas about some kind of grid become quite interesting. We discussed the idea of a European grid—not across the whole of Europe, but where appropriate. Some kind of hub and spoke offshore transmission system, with multiple developers using a single line to shore, is likely to be what we will want in certain areas. That line would be owned by the people involved in the process, and they would have the decommissioning responsibilities for that as well.
I am now advised that I can be more precise on health and safety. The Health and Safety Executive took over administrative responsibility for the health and safety of, among other things, offshore electricity installations in 2006. It is worth noting that the formal statutory transfer of those types of electricity-related safety functions forms part of the Bill. We will probably come on to issues affecting electricity safety this afternoon. I think that I have dealt with that point, which is again about offshore lines connecting to shore.
Subject to the normal consent process, the developer will make a proposal that we will consider. In doing so, we will consider issues such as visual impact and impact on environment when deciding whether to grant consent under the Electricity Act 2004. I shall try to come back to the hon. Member for East Devon on the practicalities of what happens currently, but I may not be able to do so immediately.

Charles Hendry: I raised the issue of the Severn barrage. The Minister has not yet come back on that point and I would be grateful if he did so. Will he also tell us how this aspect of the Bill relates to hybrid facilities? We had a discussion in an earlier sitting about the Eclipse Energy project, which you may be familiar with, Mrs. Humble, as it is just off the coast of your constituency. It will be a combined renewable wind and gas facility. When the wind is blowing, the facility will be used to create electricity; when it is not, the gas from a significantly depleted gas field will be used to honour the project’s electricity commitments. Will that fall under two separate decommissioning funds or is there some element in these measures to take account of such hybrid facilities?

Malcolm Wicks: I do not think that there will be one specific regulatory regime for hybrids. There are already regimes in place; the Bill will reform and improve those regimes, but again I am sorry that I will have to come back to the hon. Gentleman on how the two regimes will work together. That is a detailed and important question, and I am glad he asked me about that.
The Severn barrage is—like the hon. Gentleman, I hesitate to say “offshore”—a rather especial project. The Government have indicated their interest in it in principle, as he knows. Following the work of the Sustainable Development Commission, we are proceeding to investigate that, but it is going to take quite a lot of study, not least in terms of the ecology and environmental impact. We are looking at the kind of studies that we will require; it is not going to be built tomorrow.
I am not a lawyer, but my guess would be that, were the project to proceed, it might require new legislation. No doubt, as part of that, we would look at some issues concerning eventual decommissioning. In my mind’s eye, I can see a movement in 150 years’ time to save the Severn barrage. The successor to the hon. Member for East Devon might say that it is an area of such natural beauty—so loved and featuring on postcards and photographs—that it must be saved, even though, after so many years, it may not be fit for its original purpose, but I jest, at the risk of annoying him.

Question put and agreed to.

Clause 64 ordered to stand part of the Bill.

Clause 65

Security for decommissioning obligations

Amendment made: No. 3, in clause 65, page 52, line 36, at end insert—
‘(5) In subsection (4) “enactment” includes an instrument made under an enactment.’.—[Malcolm Wicks.]

Question proposed, That the clause, as amended, stand part of the Bill.

Malcolm Wicks: Thank you, Mrs. Humble, for reminding us about that important amendment, which I did not immediately call to mind.
Hon. Members will remember that we discussed protection from insolvency for decommissioning funds in the context of nuclear waste. The clause will ensure that moneys set aside for decommissioning of offshore renewables installations cannot be accessed by creditors in the event of a company becoming insolvent. It will do that by disapplying the relevant insolvency legislation. It will ensure that any such moneys will not be restricted or prevented from being used for decommissioning if the company with the decommissioning obligations becomes insolvent. Similar arrangements to safeguard funds already exist in section 29 of the Coal Industry Act 1994.
Without such provision, if a company with decommissioning obligations were to become insolvent, creditors could access moneys set aside for decommissioning. In other words, payments could be returned to creditors for purposes other than decommissioning. That could mean that there would not be sufficient moneys remaining to pay for decommissioning after those payments to creditors.
The clause will also allow the Secretary of State to direct that the information regarding relevant financial security arrangements be published by the person responsible for the decommissioning programme—for example, in the financial pages of that person’s website. That will ensure that informed decisions can be made by creditors: they will know that there are certain earmarked funds that they cannot access.
To ensure compliance with the direction to publish information about relevant financial security arrangements, the clause also enables the Secretary of State or a creditor of the person responsible for a decommissioning programme to apply for a court order if the direction is not followed. It is Government policy to ensure that developers make adequate provision for the cost of decommissioning their installations—to protect the environment, but also to protect the taxpayer and to meet our international obligations. By protecting any funds set aside for decommissioning from insolvency, we are minimising the risk to the taxpayer.

Charles Hendry: I have a couple of quick questions. Will the trust fund have to be set up within the United Kingdom, or might it be set up offshore—at the risk of a pun, an offshore offshore fund? That is a serious issue. If the fund is set up offshore—for example, in Liechtenstein—it may not be subject to UK laws. How would it be covered by the legislation?
The Minister talked about the super-grid, which also raises an interesting issue. The super-grid would have a range of offshore installations in a range of different territorial waters. How is that covered? Will there be a fund specifically for decommissioning the turbines in UK territorial waters? What will be in place to stop that fund being used to decommission the turbines that happened to be in German or Dutch territorial waters? Will the use of such funds to decommission facilities that have been set up in someone else’s territorial waters be explicitly prevented?

Malcolm Wicks: The second question is for the future, because we are not there yet. The European Union has asked the former German Energy Minister, Mr. Adamowitsch, to look at the issue as related to offshore wind—we noted his role in earlier conversations. I have had discussions with him, but he has not yet reported. That is an important point for the future. No doubt those issues will be looked at then, in an appropriate way. The hon. Gentleman has raised an interesting question but, with due respect, it does not require an urgent answer, because we are not there yet.
In terms of offshore offshore, I might need to take advice. [Interruption.] I thought it was a sound line, but it fell to the ground immediately. The Secretary of State will clearly have to be certain that there are appropriate arrangements for the funds. I anticipate that funds proposed by a developer will be approved case by case by the Secretary of State, so he or she—who knows, in the future?—will make a judgment on the suitability of the funding proposal. It is unlikely that we will approve a programme if the fund is outside the UK. It comes down to the Secretary of State’s sound judgment on such matters.

Question put and agreed to.

Clause 65, as amended, ordered to stand part of the Bill.

Clause 66

Provision of information to Secretary of State

Question proposed, That the clause stand part of the Bill.

Malcolm Wicks: The clause, which concerns provision of information to the Secretary of State, will ensure that the Secretary of State has access to the necessary information to carry out his functions as they relate to the decommissioning of offshore renewables. Those functions include making a judgment on the suitability and financial viability of the proposal contained in a decommissioning programme—the offshore issue relates to that.
The provisions will therefore enable the Secretary of State to require information about the place where the offshore renewable energy installation is or will be situated; the offshore renewable energy installation and an associated electric line; in certain circumstances, details of an associate as defined by the Bill; the financial affairs of the person receiving the notice for information and, in certain circumstances, the financial affairs of an associate as defined by the Bill; the proposed security in relation to carrying out the decommissioning programme; and, in certain circumstances, the name and address of any person whom the recipient of the notice believes to be an associate.
The clause will make it an offence to fail to comply with a notice requesting information without a reasonable excuse. The penalties are set out in section 113 of the Energy Act 2004. One of those is becoming rather familiar to us, and I have had the honour of reading them out on a number of occasions. However, I know that the hon. Member for Wealden likes the full works, as it were, so an offender is liable
“on summary conviction, to a fine not exceeding the statutory maximum”.
That is £5,000 in England, Wales and Northern Ireland, and £10,000 in Scotland. I will not comment on why it is £10,000 in Scotland because that matter is devolved. On conviction, they are liable
“to imprisonment for a term not exceeding two years or to a fine, or to both.”
The hon. Gentleman may want that to be 10 years, with all those prison places to fill up—in the very distant future, may I say? I do not know, but I do not want to anticipate his question.

Anne Main: I do not wish to tempt the Minister down the route of talking too much about Scotland. However, will he reassure the Committee that the £10,000 fine has nothing to do with Scotland being more worried about the severity of the crimes, but applies because it is a harsher regime?

Malcolm Wicks: I am sure that my hon. Friend the Member for Glasgow, North-West has no direct experience of that. I think that the penalty is different because Scottish law has different origins and differs from English law in many respects. Such things are lost in the mists of time, so I will not go down that route.
The clause also provides that it is an offence for a person to disclose information obtained by virtue of a notice under the clause unless it is disclosed with the consent of the person providing the information—that it
“is for the purpose of the exercise of the Secretary of State’s functions under this Chapter, the Electricity Act 1989 or Part 4 of the Petroleum Act 1998”,
or because it is otherwise required by law. Under the Bill, the offences in relation to the disclosure of information are also included in the decommissioning provisions for nuclear waste and for oil and gas installations. The penalty provisions for such offences mirror those in section 41 of the Petroleum Act 1998 and section 113 of the Energy Act 2004. It is important that information can be obtained for the Secretary of State to fulfil his functions under the chapter. The clause clearly states for what allowable purposes such information may be further disclosed. Clarity on information use and disbursement is essential to enable the decommissioning regime to operate as intended and to ensure that all operators meet their responsibilities in regard to decommissioning.

Question put and agreed to.

Clause 66 ordered to stand part of the Bill.

Clause 67

Persons who may be required to submit abandonment programmes

Question proposed, That the clause stand part of the Bill.

Joan Humble: With this it will be convenient to discuss new clause 19—Notices—
‘(1) Section 31 of the Petroleum Act 1998 (c. 17) (section 29 notices: supplementary provisions) is amended as follows.
(2) After subsection (2) insert—
“(2A) Subject to subsection (3), the Secretary of State shall not give a notice under section 29(1) in relation to an offshore installation to a person within paragraph (b) or (c) of section 30(1) unless the person owns or has owned any interest in the offshore installation.”’.

Malcolm Wicks: Part IV of the Petroleum Act 1998, which consolidates provisions from the Petroleum Act 1987, sets up the statutory scheme for the abandonment of oil and gas facilities. We are now moving on from renewables. Since the regime was established in 1987, there have been changes in business practices in the oil and gas industry. For example, there has been increasing participation by smaller players with fewer assets, who, as such, bring increased risks that they might not be able to meet their decommissioning liabilities. This issue is to do with the maturity of the fields on the UK continental shelf in the North sea. Experience has shown that it has not always been possible to share liabilities equitably between the parties responsible for installations or pipelines. This provision will strengthen the existing abandonment regime by amending part IV of the 1998 Act.
The clause will strengthen the provisions in three ways in response to the above challenges. First, it will extend the list of persons who may be required to provide a decommissioning programme upon receipt of a section 29 notice under the 1998 Act. That will include licensees who have transferred their rights to another company without the consent of the Secretary of State. Companies should not be able to avoid their decommissioning liabilities by such unconsented action.
Secondly, it clarifies the existing Petroleum Act provisions so that it is clear that they apply to limited liability partnerships in the same way as they apply to limited companies. That includes the existing provisions for making associates, such as parent companies, responsible for decommissioning when there are, for example, concerns about the financial strength of their subsidiary.
Finally, it will ensure that all those involved in a development share the decommissioning obligation from the same point in time. The wording of the current legislation means that the operator can be made responsible for decommissioning when construction of the platform starts, but his fellow licensees cannot be made responsible until one of the specified activities, such as production, has commenced. That may leave a significant period when the liability rests on a single company, which I do not believe is equitable.
By amending the 1998 Act, the clause will help to ensure a clearer legal framework of rights and duties for all concerned, which will provide greater clarity and certainty for developers and investors.

John Robertson: To help the hon. Member for St. Albans, the Scottish Presbyterian upbringing makes us a lot harder and much more unforgiving than most people. That is linked to why I rise to speak to new clause 19, which is tabled in my name, and is a technical proposal designed to probe the Minister for information. I hope that colleagues will not find it too boring, as I am afraid that that is the end of the light-hearted bit.
The Minister will be aware that now that oil and gas exploration and production on the UK continental shelf is at a more mature phase of development, it is often the case that a single licence governs the development activities of various groups of licensees, all with interests in separate blocks and unrelated infrastructure. Industry representatives have told me that the subdivision of licence interests has increased in recent years, particularly with the introduction of the fallow block initiative. It has been further complicated in instances where blocks have been re-licensed following decommissioning or partial decommissioning of existing infrastructure.
In discussions with the industry, officials from the Department for Business, Enterprise and Regulatory Reform have stated that their policy is to ensure that a party to a licence will incur a liability with regard to the decommissioning of an offshore installation only where such a party owns, or has previously owned, a beneficial interest in a specific offshore installation that requires decommissioning, or is a related person in accordance with section 30(1)(d) and (e) of the 1998 Act. That liability is not intended to extend either to parties who are licensees but have no ownership interests in the particular infrastructure, or to parties who have re-licensed in a particular block where an offshore installation has been constructed subsequent to the transfer. I hope that everyone is following this. The existing legislation is drafted so as to impose an obligation on the licensee or a previous licensee and does not expressly refer to the ownership interest in the offshore installation. Oil & Gas UK and some of its members are concerned that such liabilities might be attributed to parties who have never been involved with the ownership of such an installation. New clause 19 would clarify the current situation.

Charles Hendry: I am very interested in the hon. Gentleman’s new clause, but I would be grateful if he would clarify what the problem is. Are people who do not own offshore facilities going round applying for permission to decommission someone else’s facility? I am not sure why they would do that, although perhaps Shell would find it helpful to decommission all BP’s facilities.

John Robertson: The hon. Gentleman asks a very good question, but unfortunately I do not have a very good answer; I only have what I have been told. I will direct his question through to the Minister, who may find a way of giving a nice answer that he will be happy with.
As I said, the new clause seeks to clarify the situation, and perhaps some my remarks will help in that respect. Since the Secretary of State is using the opportunity represented by the Bill to further define, as part of the process that notifies companies that they have become a decommissioning liability, which persons may be served with a section 29 notice, this seems to be an ideal moment to gain clarification on that point. I suggest to the Minister that without the new clause it is likely that companies engaged in the transfer of existing licence interests to companies seeking innovative ways to extend the production life of fields where existing infrastructure has been decommissioned or partially decommissioned will request additional security to ensure that no liability for decommissioning new infrastructure can be attributed to them. Equally, co-licensees with an interest in separate licence areas may seek security to back the indemnities provided under the trust deed to ensure that they face no further unintended liabilities.
This clarification should assist with active training in the asset market and encourage new investors by removing the potential for increased licence entry costs. I look forward to the Minister’s response.

Malcolm Wicks: With your permission, Mrs. Humble, I will clarify an earlier point which is, in a way, related. The hon. Member for Wealden asked whether a combined hybrid project—for example, an offshore wind turbine on an oil and gas platform, a development that is beginning to happen—will be covered by two decommissioning regimes. The answer is yes. I can envisage someone making the debating point that that seems onerous, but it is unreasonable to propose a new clause to deal with a variety of hybrid types that might occur in future. The hon. Gentleman also asked whether there are parties looking to decommission oil and gas installations for which they have no interest. The answer is no.
The new clause is interesting. It relates to the maturity of the UKCS, where a number of players are now involved, including some relatively new and small enterprising companies. Our initial assessment is that the new clause could apply to well over 100 licences. We are aware of the issue, have considered it carefully, and will continue to do so. The new clause is a significant proposal, but we feel that there are complexities that need to be fully identified and discussed with the industry before deciding on the right way to treat the different parties that might be covered by it. One issue is that over the years companies have created a patchwork of commercial arrangements within many of the licences by splitting them into sub-areas. Some licensees have no interest in a particular commercial sub-area but are still a party to the licence that covers it. The wording of section 30 of the 1998 Act brings all licensees within the scope of the Secretary of State’s power to make them responsible for decommissioning an installation in any part of the licence area. Naturally, companies that have not had an interest in the installation are reluctant to carry a liability for its decommissioning.
I understand that view, and would like to explain how our policy tries to reflect the different standing of licensees. It might be helpful to see the policy as being based on three tiers of liability. The first tier comprises those who have been served with a section 29 notice to establish their statutory obligation to decommission an installation. That will include the current field players and any previous partners who have sold their interest but have not had their notices withdrawn by the Secretary of State because of concerns about the financial strength of the remaining partners.
The second tier includes previous partners who have sold their interests and have had their section 29 notices withdrawn by the Secretary of State at an earlier stage, and are therefore not obliged to submit a decommissioning programme. The third tier comprises licensees who have never had an interest in the installation or been served a section 29 notice.
Our policy is that decommissioning should be carried out by the companies that are currently responsible for the installation: the current field partners in what I call the first tier. Our proposals in the Bill include measures to strengthen the arrangements for ensuring that those companies are able to carry out the decommissioning. If a financial assessment of the first-tier section 29 notice holders indicates that they might have difficulty funding the decommissioning, provisions in the Bill will enable the Secretary of State to ask for security, such as a bank’s letter of credit, at any time during the project from any of the first-tier notice holders.

Charles Hendry: Will the hon. Gentleman give way?

Malcolm Wicks: I wonder whether it would be helpful for me to make a little more progress.

Charles Hendry: My point relates specifically to the issue to which the Minister has just referred.
It is common practice now within the North sea for different people to own and use the rigs, so there are people who develop businesses by constructing the rigs and hiring them out to others. In those circumstances, who would be responsible for the decommissioning, the contractors or the owners?

Malcolm Wicks: I hope to come back to that point in due course, as I certainly understand the hon. Gentleman’s description of where the industry is.
As I was saying, with the provision to cover the higher-risk cases, there should be little chance that the current field partners will fail to decommission the installation. However, in the unlikely event that those companies do default, the Secretary of State would have to call on other notice holders in the first tier, and if those fail, on those in the second tier. That would cover the companies that were responsible for the installation until they sold their interest and would, we believe, provide a kind of belt-and-braces approach that should cover all but the most exceptional circumstances.
We have had only two instances in the past 20 years when first-tier companies have been unable to meet their decommissioning responsibilities, but I cannot assure Parliament that our policy will cover 100 per cent. of cases. There is the very remote scenario in which the second-tier companies might also fail. On a multi-block licence, the question would then be whether the taxpayer must step in or whether the Secretary of State should call on the third-tier companies to do the decommissioning work. The new clause would remove that choice of accessing the third tier and mean that—I emphasise this point—the taxpayer would have to fund the decommissioning in that remote scenario.
It is clear from the breadth of existing powers in the Petroleum Act 1998 that Parliament intended that every effort should be made to ensure that the taxpayer does not have to pay for decommissioning due to the default of companies involved in a field. Our policy is therefore not to rule out the extremely remote possibility that it might be necessary in an exceptional case to use the full powers of the 1998 Act to protect the taxpayer.
It has been pointed out to my Department that the potential liability for third-tier companies on multi-block licences could discourage sales of field interests, but there is an answer to that situation. The industry and my Department have put considerable effort over the past two or three years into developing a new model security deed to deal with decommissioning liabilities. That deed could be used to indemnify third-tier companies in multi-block cases. As the deed has just been launched, ideally I would like some time to see how it beds in.
However, given the interest shown in the proposed new clause, I am prepared to consider that further within the context of the Bill. That will require the examination of hundreds of existing licences to consider the impact of such a change, so it is a considerable undertaking that we need to work on. There are complex commercial arrangements on some of those licences, which make the process more complicated. It is not straightforward, but I am committed to investigating it further, although I emphasise that it will take some time. I cannot give a commitment that that will lead to an acceptance of the proposal, but I hope that, in view of this undertaking, my hon. Friend the Member for Glasgow, North-West will not press his new clause.
I was asked whether the liabilities will be on the owners or the contractors. I am advised that both the owners and licensees will be liable for the decommissioning; they will both be tier 1 bodies.

Charles Hendry: I am grateful to the Minister for that helpful response, and I am sure that the hon. Member for Glasgow, North-West will be grateful for the Minister’s offer.
Can the Minister tell us a little more about the decommissioning involved? Is it the entire structure, meaning the rig, the pipe work that goes with it and the areas below the sea bed as well? I was part of the British-American parliamentary group trip to Texas last year where BP showed us how it is identifying new reserves under 10,000 ft of water and 20,000 ft of rock.
In circumstances where it is possible to identify and to reach oil and gas reserves that were simply unachievable a few years ago, an enormous amount of pipe work is going to be in the sea bed and the rock beneath it. I do not know whether it is already standard practice for that to be removed at the end of the process or whether it is simply left there. Will the Minister’s decommissioning proposals require the removal of all that infrastructure or simply that above the sea bed?

Malcolm Wicks: My understanding is that it is certainly not just that above the sea bed. I want to get this right, and we might have to return to it or I will write to the hon. Gentleman. I think that, to put it simply, the principle is to do as much as possible. In reality, however, it might not always be possible to remove some very deep infrastructure on the sea bed. I will not pretend that I have been out to a number of oil rigs or that I am an expert.
An important question is what the obligation represents. The ideal principle is that we remove as much as possible, but I do not think that it is always possible to do that 100 per cent.

Brian Iddon: Has my hon. Friend had any discussions with Ministers representing the fishing industry? More and more trawlers that trawl the bottom of the sea are snagging installations. For that reason alone it is important that as much of the debris as possible is removed after the use of these wells.

Malcolm Wicks: Yes, that seems to be the basic principle—the ideal scenario. I have said that I will write to the hon. Member for Wealden, and I will obviously copy that to Committee members. We need to establish what the regulatory framework desires and also what the practice has been in the recent past. I understand the concern. I can assure my hon. Friend that although I have not raised that issue with my colleague in the Department for Environment, Food and Rural Affairs, only yesterday I was talking about matters of mutual interest on the marine environment and my concerns as Minister for Energy. I will certainly raise that issue with him.
We are into an era where there is much competition for sea and marine resources. The hon. Member for Wealden asked about shipping; this is a fisheries aspect of shipping. There are now aspects of marine life that touch on different areas of Government and we need to co-ordinate wherever possible. I am advised that wells are sealed and made safe, and that wellheads are fully removed, which seems a fairly definitive answer. If I need to add to that, I will pursue my ambition to write to the hon. Gentleman.

John Robertson: I thank the Minister for his extensive answer and I look forward to hearing his deliberations on Report to see how we go. I reserve the right to bring back my new clause, but I will not press it.

Question put and agreed to.

Clause 67 ordered to stand part of the Bill.

Clause 68

Financial resources etc

Question proposed, That the clause stand part of the Bill.

Malcolm Wicks: I am sure that my civil servants, who are looking at hundreds of licences now, are grateful that we have had that useful discussion.
I shall move on to clause 68, which concerns financial resources. It clarifies the information that may be required to satisfy the Secretary of State of a person’s ability to fund their decommissioning obligations. It also brings forward the time when the Secretary of State can require a person to take relevant action, such as providing the security of a bank’s letter of credit when the risk of default is deemed by the Secretary of State to be unacceptable on the basis of a published assessment process. The provisions in this clause therefore help to ensure that the taxpayer is protected from the risk of a person being unable to meet their decommissioning obligations.
To assess a person’s ability to carry out decommissioning obligations, the Secretary of State may require information such as financial accounts to compare with the potential costs of the work. This is achieved by amending section 38 of the Petroleum Act 1998, which sets out the existing information requirements. Under this provision, the Secretary of State can require information such as a detailed estimate of the costs of the abandonment, predictions of future revenue, the costs and benefits of any plans for further development, and up-to-date management accounts.
Clause 68 enables the Secretary of State to obtain some of this information prior to serving a notice requiring a decommissioning programme. This will enable the Secretary of State to assess the potential impact of the decommissioning liability on what may be a small company. Later, more detailed information may also be required before the approval of an abandonment programme, in order to assess whether financial security is required. This information allows the Secretary of State to assess the financial resources of a person earlier than under the existing regime to further ensure that the risk of default on a future decommissioning obligation is minimised.
After considering the information obtained and consulting the Treasury, this clause allows the Secretary of State to require a person to take action, such as providing financial security, to satisfy the Secretary of State that the decommissioning duty can be discharged. By enabling the Secretary of State to require action before an abandonment programme is approved, he will be able to ensure that proper taxpayer protections are in place at whichever point in time the assessment process indicates a higher risk.
It is standard practice to draw up programmes at the end of the life of a field when there is greater certainty of available technologies. Given the nature of oil and gas reservoirs, the levels of risk can vary across the life of a field, and therefore we need to be able to adjust the security requirement to match the risk. The flexibility in this clause will reduce the costs of security to the companies, compared to a catch-all approach to financial security.
Officials will not be able to disclose the information unless required by law or with the consent of the person who provided it. It will be an offence to disclose information if it does not fall within the exemptions set out in this clause. The penalty for such an offence will be a criminal sanction. The same offence for disclosure of information is being proposed in the Bill in the decommissioning provisions for nuclear and offshore renewable installations. It is also important that the Secretary of State has the power to obtain information so that he can fulfil his functions under this chapter of the Bill. The industry will benefit if the Secretary of State’s actions to protect the taxpayer and the environment are based on up-to-date and accurate information.

Question put and agreed to.

Clause 68 ordered to stand part of the Bill.

Clause 69

Protection of abandonment funds from creditors

Amendment made: No. 4, in clause 69, page 57, line 35, at end insert ‘or Northern Ireland legislation’.—[Malcolm Wicks.]

Clause 69, as amended, ordered to stand part of the Bill.

Clause 70

Information about decommissioning of wells

Question proposed, That the clause stand part of the Bill.

Malcolm Wicks: The Government are committed to maximising the production of oil and gas from the UK continental shelf, often know as the UKCS. That is worth emphasising. At a time of some interest and excitement around renewables and nuclear, people can forget our still heavy reliance on oil and gas from the North sea and the wider UKCS. I think that, at present, some two-thirds of our energy comes from the UKCS. That is a considerable resource and, as such, it is important that the regulatory framework remains appropriate against a rapidly changing commercial environment.
One of the most noticeable changes in operations on the UKCS over the past five years has been the increasing number of smaller players, as noted earlier. Typically, such smaller firms are more focused on exploiting smaller fields, where their less complex and more flexible financial and operational processes can be an asset in helping to exploit new opportunities on short time frames. However, some smaller players may be less resilient and more exposed to financial risk, compared to their bigger brothers.
The Government must therefore look at what measures may be used to mitigate the additional risks to the taxpayer of having smaller firms on licences, while not discouraging viable new players from entering the market. The clauses on oil and gas licensing update the regulatory regime to do just that. It is important, for the protection of the environment, that all wells are properly plugged and abandoned. It is a term of a petroleum licence that licensees must plug and abandon their wells at least a month before the end of their licences.
There are also provisions, later in the Bill, to allow the Secretary of State to order that a suspended well be plugged and abandoned at any time. If parties to a licence cannot afford to do that when the time comes, by which we mean when their licence requires them to do so, the cost of doing so could fall to the taxpayer.
The clause allows the Secretary of State to require financial information at any point and in any circumstance during the course of the licence. Being able to gather such information will enable the Secretary of State to monitor whether the licensee has sufficient resources to plug and abandon the well when required to do so under the licence.
The obligation to plug and abandon a well arises either automatically, at the end of the licence, or when directed to do so by the Secretary of State. If the information is not provided or if, having looked at the information, the Secretary of State is not satisfied that the licensee will be capable of plugging its well in the future, then, after consulting the Treasury, the Secretary of State can require it to take certain action—including providing financial security. That will reduce the risk of licensees not being able to plug and abandon the well at the end of their licences, thereby reducing the risk that the taxpayer would have to foot the bill.
To ensure that this is an effective tool and that licensees take heed of notices given by the Secretary of State, the clause also makes it an offence for a person to fail to comply with a notice from the Secretary of State requiring either information or action. If found guilty, they would be liable, on summary conviction, to a fine not exceeding the statutory maximum or, on conviction on indictment, to a fine, imprisonment up to two years, or both. The clause will apply equally to licensees under the Petroleum Act and to licensees holding gas storage and unloading licences.

Charles Hendry: I have a couple of small points for clarification. The Bill says:
“This section applies in relation to a person who has drilled, or commenced drilling”.
What does “commenced drilling” mean? Does it cover exploratory work, so that if someone is drilling with the hope of finding gas it counts as “commenced drilling”, or does it refer to an exercise once gas has been found and extraction is involved? What, therefore, are the implications for someone doing exploratory work, and do the same rules apply to people who find nothing?
Also, the definitions towards the end of the clause say that “‘well’ includes a borehole”. What is the difference between a well and a borehole? The Minister may wish to write to me about that, as it is a point not of fundamental objection to the clause, but for my own education.

Malcolm Wicks: rose—

Stephen Ladyman: I have taken my hon. Friend by surprise. I have just a few questions for him, and I am trying to be helpful. I wonder whether the clause is phrased as well as it might be, because it seems to be embedding a logical inconsistency. If he finds that somebody is incapable of plugging the well, he can consult the Treasury about requiring them to plug it. If they are incapable of that, how can they be required to do so?
What my hon. Friend means by this is that the Government wish to identify somebody who is about to enter a process that might render them incapable of plugging the well because they do not have the money to do it and wish to intervene early to require them to do it before they enter that process. The way that the provision is phrased, however, will not allow my hon. Friend to take action until that person is not capable of it, by which time it will be too late to intervene. Would he like, therefore, to have a chat with the lawyers in his Department about whether the provision is phrased in a way that will be useful to him in the future?

Alan Whitehead: Further to that, I wonder whether the Minister can clarify whether, under circumstances that we have already discussed, a licence will be granted for carbon capture and storage, but be granted before the ending of a licence of someone who has previously drilled a well or a borehole. Will that licence therefore have to be terminated according to the conditions of the clause, or will the person who wishes to undertake carbon capture and storage by placing carbon through the well or borehole that is about to be abandoned take over the process without the well having to be capped or otherwise disposed of?
Alternatively, does my hon. Friend intend the processes to be entirely separate—that the well be capped and that all business cease? If so, presumably the person engaging in carbon capture and storage would have to undrill the well and start again.

Malcolm Wicks: On that last point, I will take refuge in the fact that CCS is still an infant technology. We are working hard on these issues, not least in our working group with the Norwegians, which our Dutch colleagues have now joined. We have taken regulatory powers in the Bill and there is also the demonstration project. I cannot therefore be precise about the answer to that question. Given that the great hope is that vacated oil and gas works would be the repository for CO2, as a non-engineer I do not envisage that they would be closed and then reopened.
There is also the issue of enhanced oil recovery. One of the commercial advantages is achieved through access to more oil and gas. That is one of the factors that helps to make CCS—I will not say financially viable, because there is a gap—part of a commercial set up. Although, as a lay person, I do not see the thing being closed and sealed and then reopened, I can see that there are interesting issues about where the two regulatory regimes come together, which we will need to explore in the future.
It was not by any means a boring question, but I cannot at the moment describe the difference between a borehole and a well. I will write to the hon. Member for Wealden, given his great interest in the subject. On exploratory drilling, we do include exploration because there is something to be decommissioned. It is one of the risks of the business that not every investigation, exploration or drilling leads to a find. There is, however, something there to be remedied.
My hon. Friend the Member for South Thanet asked about how we can require someone to plug a well if they are unable to do so and whether we can take action before they become incapable? The answer is that we can ask for information as soon as they have started to drill a well. If we are not happy with what we find, we can ask them to take action—for example, give financial security of some kind. We have therefore to be vigilant and we can act early in the process. I have talked about the different tiers that come into our regime.

Stephen Ladyman: I fully accept that it is my hon. Friend’s intention to take early information and act before the situation arises. I am not a lawyer but my understanding of the clause is that it might be interpreted to say that he cannot act until the situation has arisen, even though he may see it coming up.

Malcolm Wicks: I am not a lawyer—

It being twenty-five minutes past Ten o’clock,The Chairmanadjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at One o’clock.